Where Have All The DVD's Gone?
How Hollywood's Digital Rights Management Is Strangling DVD Sales
Five years ago, the DVD revolution insulated Hollywood from the rapid changes in technology. As prices of home theater equipment dropped, so did attendance at movie theaters, hurting Hollywood's bottom line. The popularity of other entertainment mediums such as video game systems and the internet lured consumer dollars away from Hollywood. But then there was the DVD.
"DVD sales represent more than half of the revenue studios generate from most of their movies" reports The New York Times.
There is no denying the appeal of a DVD. Inexpensive for studios to reproduce, profit margins are high. As media, DVD's are compact to store and easy to use. Hardware prices dropped quickly and soon became as ubiquitous as television sets. And the insatiable appetite for amassing personal libraries both as a trophy and by providing unlimited access to favorite films helped propel sales.
But it seems the career of Hollywood's golden boy has come to a sudden halt. Sales of DVDs have and are projected to remain fairly static after tremendous gains. Meanwhile, other distribution methods are gaining in popularity including Video on Demand and other incarnations streaming video renting. But the DVD is still where the money is.
Hollywood is hoping the high definition revolution will do for the industry what DVDs initially did, that consumers will want to built libraries of high definition movies to play on their HD Televisions. But even including high definition discs in projections, sales of movie discs are to remain static. The high def revolution will create more problems for Hollywood than are solved.
For starters, high def technology is still expensive. High definition is years, if not decades away from installation in every American living room. Then of course there are the actual disc players. The new players will be launched sometime this year, maybe. They will retail in the very reasonable $1000 range. A low end DVD player can be found for $30, off the shelf, at full suggested retail price. Studio executives may not realize this, but that's a difference of $970 going to hardware makers rather than Hollywood studios.
And then there is the issue of compatibility. The Blu Ray and HDDVD formats are competing for supremacy. But with the high cost of setting a high def player, consumers are certainly going to hesitate before amassing large collections. Just consider how useful those eight track collections were. In either case, high definition discs sales will not likely bring the same surge to the industry as DVDs did, or at least won't for another three to five years. And by then, no one will be watching movies on discs anymore.
And while the studios clamor to release high def movies on discs, a rise in popularity of the discs will probably also hurt movies attendance. At the moment there is still something to be said for seeing a movie in a cinema on a 40 foot wide screen. But high def discs will bring that clarity to a 30 or 40 inch screen, further deflating movie attendance.
Movie studios should have instead been concentrating on the smaller, 2 inch screen. iPod with video offers a portable movie experience. Cellphones are also beginning to play video, albeit shorter clips. In either case, by the time High Def discs are able to "save" Hollywood, tiny portable devices will have also saturated the market.
The trouble is this: Hollywood has insisted that DVDs not be transferable to the iPod, or for that matter, any other portable device. They see piracy as a bigger threat to declining sales than mere disinterest.
Indeed, Hollywood sees the key to profitability as simple formula: keep DVD sales going strong.
"Studios earn $17.26 for each DVD they sell, but only $2.37 for movies on demand" says The New York Times. Obviously then, studios would rather sell DVDs. But rapidly changing technological advancements have altered perceptions and expectations of the value of media.
Content owners, be it the Recording Industry or Pornographers or television producers or movie studios, have been firm on one point: piracy is bad. Rightfully so, considering the high cost of producing that content. But the way content providers have gone about protecting their content is now beginning to hurt the sales of that content.
A DVD has no value to a consumer who is not sitting at home with that DVD. The rise of iTunes music store has demonstrated that consumers are willing to pay for media as long as they can take it with them on their iPod. Most CD's still have a high value, because the content stored on the discs can be placed onto an iPod. Indeed, last year when Sony introduced a virus like piece of copy protection that, among other things, prevented the disc content from being placed onto an iPod, the consumers revolted. In a bit of role reversal, consumers sued Sony, and the worthless discs were replaced.
But DVDs still can't be imported directly onto an iPod. This means that from a consumer's standpoint, a DVD is no more valuable than a video on demand rented through a cable system. A DVD can only be viewed at home unless the cumbersome DVD is taken to another location with the necessary hardware. But thanks to technological advancements, a DVD is larger than most portable media players. Even portable DVD players are several inches larger than an iPod Video, and can only store one disc at a time. iPod's on the other hand, can fit in a pocket and store multiple hours of programming on the little harddrives. Meanwhile, video on demand rentals have similar restrictions as a DVD in terms of where the media can be played, but without the need to carry a disc around.
The bottom line is Hollywood wants to sell DVDs. Consumers want to be able to take their media on the go. The next logical step then would be to allow consumers to buy DVDs and load them onto their iPods or other portable devices just as they can with music CDs. iTunes and Windows Media player have been fairly successful at maintaining strict copy protection standards.
Sure, iTunes users can burn a CD of the music in their collection, and then use that CD to put the music onto a friend's iTunes library. But because of the way the data is compressed, every subsequent copy of a song degrades in sound quality, effectively limiting the total number of times a song is copied. But consider the same result with a DVD. If iTunes could convert a DVD to the QuickTime format needed to play the video on an iPod, the quality of the movie would not be high enough to create a copied DVD. But if studios wanted an even stricter policy, iTunes software could simply prevent a video from being burned to DVD.
iTunes and Windows Media Player devices have been effect effective at locking songs into either system's digital rights management and preventing file sharing. One big concern of movie studios is that high speed internet connections have allowed movies to be shared over networks, doing for movies what Napster did for music. But as far as file sharing is concerned, iTunes and WMP files are secure.
Hollywood dabbled in portable movies with the Playstation Portable. Recognizing that portability meant a smaller size, Sony created a new format, the PSP disc. For all purposes, the format was a giant failure, with most studios no longer releasing films in the format and retailers not restocking. Sony made several mistakes. First, the PSP discs should have been compatible with their future Blu Ray discs-- much like CDs half the diameter of regular CDs can still be played by standard CD players. If the PSP discs were blu ray compatible, Sony's format would have had an advantage when the high definition wars finally took off because consumer libraries would already have been started.
The other problem with the PSP movie discs was the assumption that people wanted another device to carry around. There is no denying the popularity of iPods, which control something like three quarters of the MP3 market. But there is only so much space in consumers pockets. Add a cellphone, and there just isn't room for the PSP. Additionally, if a user wants to watch any more than a single disc, they also have to carry around the extra PSP discs rather than simply loading the data onto the hard drive of a device. In short, the PSP movie discs were a failure because they didn't address the larger issue of portability.
Indeed, the simplest solution it seems would by for DVD's to play on a video iPod, or a similar competitor's device. The iTunes music store dominates the legal music download services. But there are others, and consumers are upset that they are "locked in" to a particular service. The best way for the consumer to get around this is to keep buying CDs (which the recording industry obviously prefers) and loading the music from the disc onto the device. They also have the added benefit of a hard copy of the CD that can later be used to reinstall the music if the current device they are using fails or is lost or stolen. The same would be true with DVDs, making the discs more valuable than a video on demand rental system-- and thus justifying the higher profit margin for Hollywood.
DVD sales are a crutch for Hollywood. The high sales of the discs came at a time when Hollywood was "suffering." Expectations of new revenue streams from High Definition discs are unrealistic and will never be fully realized. The best way to maintain profitable DVD sales is by answering the demands of consumers and making the media portable.
Labels: Consumerism
